Texas Market O Verview Kdh

TEXAS MARKET OVERVIEW 2009 MID‐YEAR

Dallas/Ft. Worth

Houston

San Antonio

Austin

Page 2

Population, Employment and Income (Major Texas Metros)

Population (2009)

Average Household Income (2009)

Source: STDB Online 2009 ESRI

Source: STDB Online 2009 ESRI

Millions

6.44

5.90

2.071.69

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Dallas - Ft Worth Houston San Antonio Austin

$83,209$77,012 $63,850

$84,735

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

Dallas - Ft Worth Houston San Antonio Austin

US Ave HH Income ($71,437)

Page 3

Population, Employment and Income (Major Texas Metros)

2009 Annual Jobs Gains: Actual & % Change

Total Non‐Ag Jobs & Annual Unemployment %

Source: Texas Labor Market Information ‐ Tracer website: LMCI Economic Profiles (June 2009)

Source: Texas Labor Market Information ‐ Tracer website: LMCI Economic Profiles (June 2009) [July ‘08 to June ‘09]

000’s

000’s

As of June 2009, the overall Texas Unemployment rate stood at 8.0%

2,123

2,621

883 862 780

8.1%8.0% 8.3%

6.9% 7.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

0

500

1,000

1,500

2,000

2,500

3,000

Dallas Houston Fort Worth San Antonio Austin

US Unemployment (9.7%)

-45

-70

-14

-6

-1

-2.1%

-2.7%

-1.6%

-0.7%

-0.2%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

-80

-70

-60

-50

-40

-30

-20

-10

0

Dallas Houston Fort Worth San Antonio Austin

Page 4

Population, Employment and Income

Texas Metro Area Population & Demographics 2009

Source: US Bureau of the Census - 2000 Census of Population & Housing. ESRI Forecast for 2009.

Metropolitan Area

National

MSA

Ranking Population

Average

Household

Income

Dal las ‐Ft Worth‐Arl ington 4 6,436,964 $83,209

Houston‐Sugar Land‐Baytown 6 5,904,050 $77,012

San Antonio 28 2,070,440 $63,850

Austin‐Round Rock 37 1,690,631 $84,735

El Paso 68 764,168 $51,067

McAl len‐Edinburg‐Miss ion 70 756,510 $41,649

Corpus Chris ti 115 421,939 $57,327

Brownsvi l le‐Harl ingen 128 408,253 $43,709

Ki l leen‐Temple‐Ft Hood 131 389,964 $58,107

Beaumont‐Port Arthur 134 384,000 $55,055

Lubbock 167 272,554 $54,447

Laredo 181 249,277 $47,529

Amari l lo 184 246,179 $58,141

Waco 190 229,890 $54,168

Longview 200 207,509 $53,513

Col lege Station‐Bryan 201 207,431 $52,556

Tyler 207 202,787 $59,490

Abi lene 252 161,642 $53,206

Wichi ta Fal l s 271 149,498 $54,065

Texarkana/TX‐AR 296 136,858 $52,194

Odessa 310 132,503 $50,283

Midland 317 128,606 $66,763

Sherman‐Denison 330 120,726 $56,825

Victoria 344 115,936 $57,169

San Angelo 362 106,721 $53,691

Page 5

Population, Employment and Income

Texas Metropolitan Statistical Areas

Total Inventory And Occupancy

2009 Y‐T‐D Net Absorption 2009 Current Construction And Current Construction As a % of Total SF

Page 6

Occupancy Rate

Current Const As a % of total SF

Major Texas Office Markets Summary

Million SF Occupancy %

Million SF

314

255

6177

83.2%86.0%

88.7%

84.7%

70%

75%

80%

85%

90%

95%

100%

-

100

200

300

400

Dallas/Fort Worth

Houston San Antonio Austin

0.1

-0.3

0.4

-0.7

3.5

4.7

0.8 0.8

1.1%

1.8%

1.3%

1.0%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

-2

-1

0

1

2

3

4

5

6

Dallas/Fort Worth


Absorption

Current Construction

Total Inventory

Page 7

Major Texas Office Markets Summary

Dallas/Ft. Worth Total Inventory SF: 314,290,090 Current Occupancy%: 83.1% (as of Mid‐Year 2009)

The DFW Office market ended the 2nd Qtr 2009 with a va‐cancy rate of 16.9%.

The vacancy rate was up from the previous quarter, with net absorption totaling negative (507,096) SF in the 2nd Qtr.

Vacant sublease space increased in the 2nd Qtr, ending at 2.71 million SF.

Quoted rental rates ended the 2nd Qtr at $20.19 PSF (full‐service gross), a slight decrease from the previous quarter.

A total of 28 buildings delivered in the quarter totaling 686,789 SF, with 3.52 million SF still under construction at the end of the 2nd Quarter.

In the first quarter, 6 office building transactions reported an average sales price per SF of $101.80. Reported cap rates were higher in 2009, averaging 9.90% compared to the same period in 2008 when they averaged 8.29%.

Houston Total Inventory SF: 254,603,655 Current Occupancy%: 86.0% (as of Mid‐Year 2009)

The Houston Office Market ended the 2nd Qtr 2009 with a vacancy rate of 14.0%.

The vacancy rate was up over the previous quarter, with net absorption totaling negative (97,834) SF in the 2nd Qtr.

Vacant sublease space increased in the 2nd Qtr, ending at 2,507,243 SF.

The citywide average quoted rental rate (for all classes) fell to $23.26 PSF on an annual full‐service basis at the end of the 2nd Qtr 2009, a slight decrease from the previous quar‐ter.

During the 2nd Qtr 2009, 21 buildings totaling 1,474,991 SF delivered to the Houston market area.

There were 4.68 million SF of office space under construc‐tion at the end of the 2nd Qtr 2009.

In the first 3 months of 2009, 4 office building transactions reported an average sales price per SF of $63.25. Reported Cap Rates were higher in 2009, averaging 9.80% compared to the same period in 2008 when they averaged 7.66%.

Austin Total Inventory SF: 77,212,005 Current Occupancy%: 84.7% (as of Mid‐Year 2009)

The Austin Office market ended the 2nd Qtr 2009 with a vacancy rate of 15.3%.

The vacancy rate was up over the previous quarter, with net absorption totaling negative (933,024) SF in the 2nd Qtr.

Vacant sublease space increased in the 2nd Qtr, ending at 792,346 SF.

The citywide average quoted rental rate (for all classes) was $25.57 PSF on an annual full‐service basis at the end of the 2nd Qtr 2009, representing a slight increase over the previ‐ous quarter.

During the 2nd Qtr 2009, 3 buildings totaling 100,644 SF delivered to the Austin market.

There were 772,843 SF of office space under construction at the end of the 2nd Qtr 2009.

In the first three months of 2009, the market saw 1 office sales transaction with a total volume of $38 million and an average sales price of $184.09 PSF.

Cap rates have been higher in 2009, averaging 9.0% com‐pared to the same period in 2008 when they averaged 5.92%.

San Antonio Total Inventory SF: 60,800,962 Current Occupancy%: 88.7% (as of Mid‐Year 2009)

The San Antonio Office market ended the 2nd Qtr 2009 with a vacancy rate of 11.3%.

The vacancy rate was up over the previous quarter, with net absorption totaling positive 612,133 SF in the 2nd Qtr.

Vacant sublease space decreased in the 2nd Quarter, ending at 600,565 SF.

The citywide average quoted rental rate (for all classes) increased to $18.55 PSF on an annual full‐service basis at the end of the 2nd Qtr 2009, representing a slight improve‐ment over the previous quarter.

During the 2nd Qtr 2009, 7 buildings delivered to the market with 773,926 SF.

776,970 SF of office space remained under construction at the end of the 2nd Qtr 2009.



Page 8

Occupancy Rate


Major Texas Retail Markets Summary

Million SF

Million SF

Occupancy %

Absorption


337

291

115

66

90.5%

90.6%92.6% 92.4%

70%

75%

80%

85%

90%

95%

100%

-

100

200

300

400

Dallas/Fort Worth


0.7 0.8 0.8

-0.1

4.2

2.0

1.3

0.4

1.3%

0.7%

1.1%

0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

-1

0

1

2

3

4

5

6

Dallas/Fort Worth


Total Inventory

Page 9

Major Texas Retail Markets Summary


The DFW Retail market experienced a slight decline in mar‐ket conditions in the 2nd Qtr 2009. The vacancy rate went from 9.3% in the previous quarter to 9.5% in the current quarter.

Net absorption was positive 166,491 SF, and vacant sublease space decreased by 362,191 SF.

Quoted rental rates (all classes) decreased from 1st Qtr 2009 levels, ending at $14.43 PSF (NNN).

A total of 32 retail buildings with 977,934 SF of retail space delivered to the market in the quarter.

There were 4.25 million SF still under construction at the end of the 2nd Qtr 2009.

In the first quarter, the market recorded 12 retail sales trans‐actions with an average price per SF of $104.59. Reported Cap Rates have been higher in 2009, averaging 8.89%, com‐pared to the same period in 2008 when they averaged

8.05%.


The Houston Retail market experienced a slight decline in market conditions in the 2nd Qtr 2009. The vacancy rate went from 9.0% in the previous quarter to 9.4% in the cur‐rent quarter.

Net absorption was negative (244,613) SF, and vacant sub‐lease space decreased by 200,050 SF.

Quoted rental rates (all classes) decreased from 1st Qtr 2009 levels, ending at $15.53 PSF (NNN).

A total of 14 retail buildings with 766,810 SF of retail space delivered to the Houston market in the 2nd Qtr.


In the first 3 months of 2009, the market recorded 4 retail sales transactions with an average price per SF of $78.22. Reported cap rates were higher in 2009, averaging 8.38%, compared to the same period in 2008 when they averaged 7.52%.


The San Antonio Retail Market experienced a slight im‐provement in market conditions in the 2nd Qtr 2009. The vacancy rate went from 7.7% in the previous quarter to 7.4% in the current quarter.

Net absorption was positive 1,001,928 SF in the 2nd Qtr and vacant sublease space decreased by 92,970 SF.

Quoted rental rates decreased from 1st Qtr 2009 levels, ending at $15.73 PSF (NNN).

A total of 11 retail centers with 714,293 SF of retail space delivered to the market in the quarter.



The Austin Retail market experienced a slight decline in market conditions in the 2nd Qtr 2009. The vacancy rate went from 7.3% in the previous quarter to 7.6% in the cur‐rent quarter.

Net absorption was negative (35,864) SF, and vacant sub‐lease space decreased by 97,400 SF.

Quoted rental rates (all classes) increased from 1st Qtr 2009 levels, ending at $20.48 PSF (NNN).

A total of 9 retail centers with 127,972 SF of retail space delivered to the Austin market in the quarter.

There were 355,909 SF of retail space still under construc‐tion at the end of the 2nd Qtr 2009.

In the first 3 months of 2009, the market saw 1 retail sales transaction with an average price PSF of $109.65. Cap rates have been slightly lower in 2009, averaging 7.25% com‐pared to the same period in 2008 when they averaged 7.46%.



Page 10

Occupancy Rate


Major Texas Industrial Markets Summary

Absorption


Million SF

Million SF

Occupancy %

-1.5

0.1

0.0-0.6

2.4 2.6

0.1 0.1

0.3%

0.5%

0.1%0.2%

-1.0%

-0.5%

0.0%

0.5%

1.0%

-2

-1

0

1

2

3

Dallas/Fort Worth


746

481

99 82

88.7%

93.0%

90.5%

86.9%

70%

75%

80%

85%

90%

95%

100%

-

100

200

300

400

500

600

700

800

Dallas/Fort Worth


Total Inventory

Page 11

Major Texas Industrial Markets Summary


The DFW Industrial market ended the 2nd Qtr 2009 with a vacancy rate of 11.3%.

The vacancy rate was up over the previous quarter, with net absorption totaling negative (753,203 SF) in the 2nd Qtr.

Vacant sublease space decreased in the quarter, ending the 2nd Qtr at 3.69 million SF.

Quoted rental rates ended the 2nd Qtr at $4.61 PSF (NNN), a decrease from the previous quarter.

A total of 14 buildings delivered to the DFW market in the quarter totaling 3.39 million SF.

There were 2.44 million SF of industrial space under con‐struction at the end of the 2nd Qtr 2009.

In the 1st Qtr of 2009, the market saw 7 industrial sales transactions with an average price PSF of $36.09. Cap rates have been higher in 2009, averaging 10.88% compared to the same period last year when they averaged 8.61%.


The Houston Industrial market ended the 2nd Qtr 2009 with a vacancy rate of 7.0%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (4,106) SF in the 2nd Qtr.

Vacant sublease space increased in the 2nd Qtr, ending the quarter at 1,222,586 SF.

Quoted rental rates ended the 2nd Qtr at $5.72 PSF (NNN), an increase over the previous quarter.

A total of 34 buildings delivered to the market in the quar‐ter totaling 1.61 million SF.

There were 2.55 million SF of industrial space under con‐struction at the end of the 2nd Qtr 2009.

In the first quarter of 2009, the market saw 6 industrial sales with an average price per SF of $61.98. Cap rates have been higher in 2009, averaging 9.00% compared to the same period last year when they averaged 8.38%.


The San Antonio Industrial market ended the 2nd Qtr 2009 with a vacancy rate of 9.5%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (173,936) SF in the 2nd Qtr.

Vacant sublease space increased in the 2nd Qtr, ending the quarter at 485,180 SF.

Quoted rental rates ended the 2nd Qtr at $5.67 PSF (NNN), a slight decrease from the previous quarter.

A total of 3 buildings delivered to the market in the quarter totaling 330,825 SF.

There were 70,159 SF of industrial space under construction at the end of the 2nd Qtr 2009.


The Austin Industrial market ended the 2nd Qtr 2009 with a vacancy rate of 13.1%. The vacancy rate was up over the previous quarter, with net absorption totaling negative (775,526) SF in the 2nd Qtr.

Vacant sublease space decreased in the 2nd Qtr, ending the quarter at 277,094 SF.

Quoted rental rates ended the 2nd Qtr at $7.37 PSF (NNN), an increase over the previous quarter.

During the 2nd Qtr 2009, a total of 2 buildings delivered to the market totaling 138,825 SF.

There were 123,148 SF of industrial space under construc‐tion at the end of the 2nd Qtr 2009.

In the first 3 months of 2009, the market saw 1 industrial sales transaction averaging $58.89 PSF. Cap rates have been lower in 2009, averaging 7.75% compared to the first three months of last year when they averaged 8.21%.



Page 12

Occupancy Rate


Major Texas Multifamily Markets Summary

Absorption


Occupancy % Thousands (Units)

Thousands (Units)

-0.7 -0.2 -0.1 -0.5

2425

7

114.3%

4.6%

5.4%

7.5%

0%

1%

2%

3%

4%

5%

6%

7%

8%

-5

0

5

10

15

20

25

Dallas/Fort Worth


557543

121 129

89.3% 87.4%88.9%

89.6%

70%

75%

80%

85%

90%

95%

100%

-

100

200

300

400

500

600

700

800

Dallas/Fort Worth


Total Inventory

Page 13

Major Texas Multifamily Markets Summary

Dallas/Ft. Worth Total # of units: 556,996 Current Occupancy%: 89.30% (as of February 2009)

The DFW market continues to see occupancy levels fall, resulting in stagnating rents over the past four months. With mounting lay‐offs expected to occur within major corporations in the Dallas area, north Texas is feeling the impacts of the economic slowdown.

As apartment occupancy continues to decline, look to see communities offer more concessions as they attempt to stabilize occupancy. This increase in concessions will have a negative impact on turnover rate, as residents that are un‐able to afford full market rents will undoubtedly turn to the next best special at a neighboring project.

Absorption in February was negative (168) units, while an‐nual absorption stands at 680 units.

Rental rates per unit posted a monthly decrease declining $0.57 to $758.50. Over the last twelve months, rent per unit has increased $10.74.

The average rent PSF increased $0.009 PSF over the past year to a rate of $0.89 PSF.

Ongoing construction in DFW climbed to 24,069 units at the end of February 2009, with an additional 19,918 units in the planning stage.

Houston Total # of units: 543,417 Current Occupancy%: 87.38% (as of June 2009)

The overall vacancy rate increased slightly to 12.62%, from a rate of 12.55% in the previous month.

The Houston apartment market continues to show mixed signals as rents climb while occupancy declines. Many pro‐posed apartment communities are being transitioned to “hold” status while a large portion of developers are seek‐ing agency loans in order to obtain financing in this chal‐lenging marketplace.

Overall rents stand at $0.88 PSF. Class “A”: $1.165 PSF (down slightly from May’s rate); Class “B” remains steady at $0.83 PSF; Class “C” also remained steady at $0.71 PSF and Class “D” rates declined slightly to $0.71 PSF.

Pre‐leasing is currently underway in thirty‐two communities containing a projected 9,164 units city‐wide.

Overall occupancy is expected to slip further as these new communities lease‐up, while rental rates are anticipated to continue increasing at a steady pace.

As of February 2009, there are 25,162 units under construc‐tion and 10,721 units in the planning stage.

San Antonio Total # of units: 121,300 Current Occupancy%: 88.87% (as of February 2009)

The San Antonio apartment market has hit the ceiling in terms of rents. The increase in vacancy rates have forced communities to begin lowering rents as opposed to simply increasing concessions and the results are market average declines in both square foot and per unit metrics.

Absorption continues its negative trend on both an annual and monthly basis, indicating that pressure on rents is not over. Monthly absorption in February stands at negative (152) units with Y‐T‐D absorption also being negative at (104) units.

San Antonio apartment market occupancy decreased 0.14 points over the month, and is down 2.15 points over the last twelve month period to 88.87%.

Rental rates PSF decreased $0.001 in February to $0.856 PSF, but remain $0.006 above last year’s level.

At $692.48 rent per unit reported a monthly decrease of $0.66, although they are still up $5.62 over the last year.

As of February 2009, there are 6,533 units under construc‐tion with 7,060 units in the planning stage.

Austin Total # of units: 129,142 Current Occupancy%: 89.63% (as of February 2009)

The Austin area MF market continued to struggle during February, as occupancy declined by over half a point and rents remained flat after months of steady increase.

Austin’s MF market occupancy decreased 0.57 points to 89.63% and has fallen 3.62 points since this same time last year.

The average rent PSF has stabilized at $0.99 and has gained $0.01 PSF over the past twelve months.

Average rent per unit posted an increase of $0.32 in Febru‐ary; currently at $829.96, rent per unit is up $13.62 over the past year.

Austin posted negative absorption in February of (399) units, bringing annual absorption to negative (485) units.

There are currently 11,090 units under construction throughout the Austin area.

There are 14,752 units in the planning stage in the Austin area market.

Page 14

Interesting Quotes

TEXAS Texas grass is indeed greener than elsewhere (Economy: Texas) 7/15/2009 Despite the recent lack of rain, the “grass” in Texas is much greener than in most states. At least that’s the picture according to the U.S. Census Bureau and recent rankings by Forbes and Business Week. The combination of rising unemployment, rapid market undulations, stingy credit, diminished home values, and consumer restraint in regard to major purchases has left many Americans finding that the careers and communities with which they have identified themselves for lengthy peri‐ods are no longer as economically dependable as they once assumed. All states have been affected by the national economic downturn, but a handful of states, especially Texas, remain relatively healthy and inviting for those seeking greener pastures. Geographic mobility has become the password for job‐seekers with flexibility in terms of skills, family responsibilities and the marketing of their homes. According to the online moving‐services company, Relocation.com, although the economy has placed a strain on migration to some ex‐tent and is causing fewer people than normal to move from place to place, for those able to relocate, Texas is the most popular draw among all states. Forbes reports that of the top five cities to which Americans are resettling, two are in the Lone Star State — Austin, number two nationally, and Dallas, in fifth place. Based on a recent study published by Business Week, three Texas metro areas are among the 20 best places in which to start a new career or a new life. They include Amarillo at number 9, followed by Beaumont‐Port Arthur and Waco, at 12 and 14, respectively. The rankings were based on the percentages of companies that anticipated increasing their employment roles during the third quarter of this year. According to a survey of CEOs by Chief Executive Magazine, for the fourth year in a row, Texas is the top state in terms of job growth and business development. [San Antonio Business Journal] Texas faring better in recession (Economy: Texas) 6/30/2009 Texas is one of the best places in the world to work through the current global recession, and the third quarter could mark growth in the gross domestic product, according to BBVA Compass Chief Economist Nathaniel Karp. “It took the state a year to start seeing the affects of the recession,” Karp says. That particularly took hold after oil and gas prices declined, reduc‐ing activity in that sector statewide. Other parts of the globe and the nation are dealing with greater economic headwinds. Asia, excluding China, and Eastern Europe, in particular, faces tough challenges ahead. [San Antonio Business Journal] Texas dominates list of best cities for job growth (Employment: Texas) 4/14/2009 According to a study by newgeography.com and Forbes.com, the State of Texas is home to nine of the top 20 best cities for job growth in the U.S. The top of the complete ranking was dominated by one state: Texas. The Lone Star State is home to nine of the top 20 cities on the list ‐ including number one‐ranked Odessa. Further, the top five large metropolitan areas for job growth were Austin, Houston, San Antonio, Fort Worth and Dallas. The study is based on job growth data from the Bureau of Labor Statistics for 333 regions across the U.S. The analysis looked not only at job growth in the last year but also at how employment figures have changed since 1996.

Page 15

Interesting Quotes

The index is calculated from a normalized, weighted summary of: recent growth trend: the current and prior year's employment growth rates, with the current year emphasized (two points); mid‐term growth: the average annual 2003‐2008 growth rate (two points); long‐term trend: the sum of the 2003‐2008 and 1998‐2002 employment growth rates multiplied by the ratio of the 1998‐2002 growth rate over the 2003‐2008 growth rate (two points); and current year growth (one point).

[Forbes.com]

Texas is America's top exporter (Economy: Texas) 2/12/2009 Texas is the nation’s top exporter for the seventh year in a row, according to a new U.S. Department of Commerce report. Gov. Rick Perry’s office released the data that helped Texas secure the top spot ‐ namely the state’s 14 percent increase in exports in 2008 over 2007. Last year, Texas exports totaled $192.14 billion, approximately $23.92 billion more than in 2007. The top five recipients of Texas exports include Mexico, Canada, China, the Netherlands and Brazil. [Dallas Business Journal] Texas‐Size Growth Spurt (Demographics: Texas) 7/7/2009 TEXAS (U.S. Census Bureau) – Round Rock has been named the second fastest‐growing city in the nation from 2007 to 2008 with an 8.16 percent rise in population, according to the U.S. Census Bureau's 2008 population estimates. In all, four of the ten fastest‐growing large cities were in Texas, including McKinney (fifth), Killeen (ninth) and Fort Worth (tenth). Four Texas cities were also among the ten largest numerical gainers — Houston (third), San Antonio (fifth), Fort Worth (sixth) and Austin (ninth). McKinney was the nation's fastest‐growing city between April 1, 2000, and July 1, 2008, as its population more than doubled to 121,211. RECON: 7/7/2009. Texas Ranks First for Business (Economy: Texas) 6/19/2009 TEXAS (Austin Business Journal) – Texas stands out as the top state for business, according to Directorship magazine. Texas "has a pro‐business tax climate that ranks third, a low cost of living, a relatively solid economy and a litigation environment that ranks tenth on our list," the magazine reported. "Texas also ranks first in the number of Fortune 500 companies located there." Major corporate relocations and expansions such as Comerica's move to Dallas and Caterpillar's new plant in Seguin were highlighted as reasons for Texas' ranking. Directorship evaluated states' overall economies, tax climates, cost of living and education to determine rankings. RECON: 6/19/2009. Texas Quick to Bounce Back from Recession, Forbes Says (Economy: Texas) 6/16/2009 WASHINGTON (Forbes) – Several Texas cities are poised for a quick recovery from the national recession, according to Forbes. Austin–Round Rock ranked first on the magazine’s recent list of ten cities most likely to bounce back quickly. Meanwhile, San Antonio ranked fifth, Dallas–Fort Worth–Arlington seventh and McAllen‐Edinburg‐Mission ninth. To compile its list, Forbes looked at estimates from Moody's Economy.com of the projected gross domestic product of metropolitan areas across the United States, as well as unemployment figures from the Bureau of Labor Statistics and home prices, incomes and affordability data from the National Association of Home Builders. Forbes also put together a list of ten worst cities for recession recovery. No Texas cities made that list. RECON: 6/16/2009.

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Interesting Quotes

DALLAS/FORT WORTH DFW to lead in construction starts (Mixed‐Use: Dallas‐Fort Worth‐Arlington) 7/16/2009 Dallas‐Fort Worth is predicted to lead Texas in starts, according to a report by McGraw‐Hill Construction. The 2009 forecast calls for $14.1 billion in construction starts in North Texas, compared to $12.5 billion in the Houston‐Sugar Land‐Baytown area, $4.9 billion in San Antonio and $4.4 billion in Austin. Those figures represent a 12 percent decrease in DFW construction compared to 2008. The $14.1 billion in DFW includes: $4.2 billion in residential construction, $6.3 billion in nonresidential, and $3.6 billion in non‐building construction – according to the forecast. Construction starts in Texas this year are expected to fall by 21 percent to $49.8 billion, the steepest drop since 1967. [Dallas Business Journal] Fort Worth is tenth fastest‐growing city in the nation (Demographics: Dallas‐Fort Worth‐Arlington) 6/30/2009 (Fort Worth) ‐ Fort Worth was the tenth fastest‐growing city in the country in 2008, and three other Texas towns were in the top ten, according to U.S. census population estimates released Tuesday. Texas was well‐represented among the fast gainers. Round Rock, north of Austin, was number two on the list with a gain of 7,877 residents. McKinney was number five and Killeen was number nine on the growth chart of cities with populations over 100,000. However, Fort Worth, which added 24,413 residents over the 12‐month period and grew to 703,073, stands out in the crowd, census demogra‐pher Greg Harper said. "If you look at the ten fastest‐growing cities, Fort Worth is number ten, but it is by far the largest city among the ten," Harper said. "It is growing at 3.6 percent over that time, and it is a little unusual to see a city of that size among the fastest‐growing. If you look at the top 25, it is still the largest city among those cities in terms of percent change from 2007 to 2008." In Dallas, an increase of 13,538 people made for a total population of 1,279,910. [Star‐Telegram] DFW ranks tenth in global competitiveness (Economy: Dallas‐Fort Worth‐Arlington) 4/27/2009 Fueled by a strong business climate, the Dallas‐Fort Worth area ranked tenth in global competitiveness among 21 international metropolitan re‐gions, according to a report by the Dallas Regional Chamber. Dallas‐Fort Worth’s low costs of doing business and low business taxes were the region’s strongest assets, whereas creating a more robust talent base is the region’s biggest challenge, according to the findings of “Global DFW.” Dallas tied for tenth place with Houston, the only other Texas metro area on the list. Tokyo, New York, Paris, Toronto and London made up the top five. A panel of economists prepared the report for the Dallas Regional Chamber. The goal of the two‐year study is to create a better understanding of the region’s competitive position in the global economy. The region’s wave of globalization started in the mid‐1970s when Dallas and Fort Worth began to merge around the newly opened Dallas‐Fort Worth International Airport, said Lyssa Jenkens, chief economist and vice president of Business Information & Research for the Dallas Regional Chamber. Since then, easy access to the region, its business climate and a strong quality of life have made Dallas‐Fort Worth increasingly competi‐tive in the global economy. “If the question is, ‘does globalization matter,’ the answer for Dallas‐Fort Worth is, ‘Yes, it’s who we are,” Jenkens said. “DFW is the product of globalization.” Dallas Regional Chamber of Commerce.

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HOUSTON Houston shines in economic survey (Economy: Houston‐Sugar Land‐Baytown) 6/17/2009 (Houston) ‐ Houston is one of the strongest‐performing metro areas in the nation, according to a new study from the Brookings Institution. The Bayou City is ranked No. 4 in the Washington D.C.‐based MetroMonitor report on the economic performance of the 100 largest metropolitan areas during the recession through the first quarter 2009. Houston is one of four Texas cities in the top five. San Antonio leads the list, followed by Oklahoma City and Austin, while Dallas comes in fifth place. The rankings were based on four indicators: Percent employment change from peak quarter to first quarter 2009; percent change in unemploy‐ment rate from March 2008 to March 2009; percent gross metropolitan product change from peak quarter to first quarter 2009; and percent change in housing prices from first quarter 2008 to first quarter 2009. Specializations in energy and government, large amounts of federal hurricane recovery funding for the Gulf Coast, and smaller increases in hous‐ing prices during the early and mid‐2000s were among the likely reasons why the Southwest, including Texas, performed better economically than other metro areas, the report said. [Houston Business Journal] Houston No. 1 in nation for manufacturing (Industrial: Houston‐Sugar Land‐Baytown) 5/22/2009 Houston ranks first among U.S. cities for number of manufacturing plants and related jobs, according to the 2009 Texas Manufacturers Register. Houston ranks above that of New York, Chicago and Los Angeles. Manufacturing has emerged as a top employer and thriving business in Texas also. According to the 2009 Texas Manufacturers Register, Houston boasts 3,957 manufacturers employing 221,697 workers. Texas as a whole is home to 23,589 manufacturers employing 1,218,586 workers. "Houston's combination of low cost living, favorable business climate, educated workforce and proximity to the oil industry has made it the choice of many manufacturers and other Fortune 500 companies," says Tom Dubin, President of Manufacturers' News. MNI reports industrial machinery and equipment manufacturing is Houston's top sector, accounting for 58,716 of the city's manufacturing jobs or 27 percent with virtually no change in employment reported over the year survey year, which runs from April 2008 to April 2009. Oil & gas extrac‐tion ranks second with 30,584 jobs, up 7.8 percent over the year while third‐ranked fabricated metals account for 28,903, down 5.4 percent. According to the industrial directory, Dallas ranks second in the state for industrial jobs, with 89,819 workers, and ranks sixth in the nation for industrial employment. Fort Worth is third with 67,283 jobs, while fourth‐ranked San Antonio is home to 53,196. Austin accounts for 42,434 of Texas' industrial jobs, according to MNI. [PRNewswire] Houston earns top spot in nation for corporate growth (Economy: Houston‐Sugar Land‐Baytown) 3/9/2009 (Houston) ‐ Houston’s domination in the energy sector and its ability to land huge technology deals drove the city to the number one spot for the first time on Site Selection magazine’s list of Top Metro rankings for corporate location and expansion activity. Site Selection said Houston clinched the top spot after scoring 179 corporate real estate deals in 2008, unseating three‐year incumbent Chicago‐Naperville‐Joliet. Dallas‐Fort Worth‐Arlington finished second with 156 projects, and Chicago came in third with 138. Last year, Houston was fourth behind Cincin‐nati and St. Louis for cities with more than 1 million in population. [Houston Business Journal]

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SAN ANTONIO San Antonio Economy Outperforms Nation (Economy: San Antonio) 6/19/2009 SAN ANTONIO (San Antonio Express‐News) – The San Antonio economy has outperformed all of the nation's largest cities through first quarter 2009, according to a Brookings Institution report. The city has become accustomed to being labeled a top economy. It recently ranked fifth on Forbes.com's list of cities most likely to bounce back quickly from the recession. San Antonio's economy — driven by sectors such as health care and insurance — has benefited greatly from military expansions and relatively stable housing prices. The Brookings Institution report measured changes in employment totals, unemployment rates, housing prices, the values of goods and services produced by cities, and other factors. Other Texas cities listed as top‐performing metro areas include: Austin (third), Houston (fourth), Dallas (fifth), McAllen (sixth) and El Paso (11th). RECON: 6/19/2009. San Antonio named best‐performing city in recession (Economy: San Antonio) 6/17/2009 San Antonio has been ranked the strongest metropolitan area in the country for economic performance, according to a new report from the Brookings Institution. In the first of a series of quarterly MetroMonitor reports, Brookings ranked San Antonio, Oklahoma City, Austin, Houston and Dallas as the top five metro areas in the country in economic performance in the wake of the recession. Brookings ranked the top 100 metropolitan areas based on six key indicators — employment, unemployment rates, wages, gross metropolitan product, housing prices and foreclosure rates. This initial MetroMonitor report covers first quarter 2009. San Antonio is home to Randolph Air Force Base, Fort Sam Houston, Lackland Air Force Base and Brooks City‐Base. The 2005 Base Realignment and Closure (BRAC) decision alone is providing a significant economic punch to the Alamo City’s economy through the consolidation of high‐paying military health care jobs and more than $2 billion worth of new construction activity. A separate report released by The DiLuzio Group LLC outlining the impact of BRAC showed that Fort Sam Houston would experience an increase in personnel of 11,500. The Army post will also gain 7.9 million sf. Construction activity due to BRAC alone should create an additional 46,000 construction jobs. [San Antonio Business Journal] San Antonio again a census standout (Demographics: San Antonio) 7/1/2009 The census' newest population estimates show that San Antonio added more people than all but four other U.S. cities, growing by almost 26,000 residents, or about 1.9 percent, from July 2007 to July 2008. San Antonio ranked just under New York, Phoenix, Houston and Los Angeles, respectively, and just ahead of Fort Worth, New Orleans, Chicago, Austin and San Diego. New Orleans, whose population was devastated by Hurricane Katrina in 2005, grew by more than 23,000 people. But it led the nation in percent‐age of growth, with 8.2 percent, on that list. Round Rock came in second at 8.16 percent, along with three other Texas cities. [San Antonio Express‐News]

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AUSTIN Forbes ranks Austin No. 8 on best places for biz list (Economy: Austin‐Round Rock) 3/27/2009 (Austin) ‐ Forbes.com ranks Austin the eighth best place for business and careers in its latest list. Texas' Capital City rose significantly from 47th on last year's list. Austin was behind cities such as No. 1 Raleigh, N.C. and No. 4 Fayetteville, Ark. The list was ranked according to factors such as cost of doing business and projected employment growth. Forbes.com cited Austin's projected annual job growth rate of 2.3 percent ‐ the fifth fastest in the country, and its relatively low subprime mort‐gage exposure. [Austin Business Journal] Austin leads nation in job growth for fourth straight month (Employment: Austin‐Round Rock) 7/1/2009 (Austin) ‐ Austin was the only major city in the country, and one of few overall, to increase jobs in May, the fourth month in a row it has won that distinction, according to a Labor Department report. Of the 38 largest cities that the department tracks, only Austin had more jobs in May than a year earlier. The Central Texas job growth rate was 0.5 percent. Only 15 cities of all sizes increased jobs in that period, and 295 had job losses. All metro areas had higher unemployment rates in May 2009 than they did in May 2008. [Austin American‐Statesman] Austin's economy is stabilizing and 'on the mend' (Economy: Austin‐Round Rock) 6/16/2009 (Austin) ‐ The Austin‐area economy has stopped declining and might be ready for a gradual recovery in the next year, according to a new report from economists at Wells Fargo. "The Austin economy is already on the mend, or at least has not continued to fall," Wells Fargo Economics Group Senior Economist Eugenio Alemán wrote in the report. But the report says the area's housing market remains weak, and that a recovery there won't be strong. The unemployment rate rose to 6.4 percent in April, higher than the 6.2 percent at the peak of the 2001 recession. But, so far, Central Texas has had continued job growth in this recession, something that didn't happen the previous time. Alemán and some other economists say the region will have slight job losses later this year, ending with about 4,000 fewer jobs than in 2008. It will be well into 2010 before the job market gathers full steam, he said. Austin's housing market will be late to the recovery, Alemán said, because it will lag behind improvements in the job market. [Austin American‐Statesman]

Data Sources Data sources for the information contained in this report are:

The CoStar Group 2009 Mid‐Year Market Report

Real Estate Center at Texas A&M University

O’Connor and Associates Apartment Market Overview (February & June 2009)

Houston 1300 Post Oak Blvd., Suite 1200

Houston, TX 77056 (713) 871‐5800

San Antonio / Austin Pacific Plaza, Suite 604 14100 San Pedro Ave. San Antonio, TX 78232

(210) 828‐2112

www.q10kdhco.com

2009 Mid‐Year